Opened a small clothing store. Got confused with the accounting: where to put rent, sales assistant salary, utilities? I'm calculating everything myself in Excel, afraid I'll mess up and then be surprised by losses.
Someone already correctly pointed out the main thing above: the cost of goods is exactly what you paid the supplier per unit. Rent, salaries, utilities - these are operating (overhead) expenses that don't go into the cost of a specific item, but they directly affect your final profit. If you start including them in the cost of each dress or shirt, you'll get confused in your calculations and won't be able to tell whether the product is actually profitable or you're just masking a problem.
In practice, I do it this way: one Excel column for the purchase price per unit of goods (this is the pure cost), the next one for retail price, the third for gross profit from that item (the difference between price and purchase cost). And then I separately track all operating expenses for the month: rent, salaries, utilities, packaging, delivery from the supplier. I add them up and subtract from the total gross profit - that's your real final result.
Main advice: don't allocate overhead expenses to individual items, it's better to look at the numbers as a whole. If your store made 100 thousand in gross profit for the month, and operating expenses ate up 80, you have 20 thousand in net profit left. That's way clearer than trying to divide the rent by the number of items sold.
The cost of goods at retail is basically the purchase price, and rent, salaries, utilities - those are already operating expenses, they affect profit but don't go into the cost of a specific item. Think of it this way: how much you paid the supplier plus shipping the goods to the store - that's your cost per unit, and then separately track all your other expenses and subtract them from your gross profit, then you'll see the actual result.
In retail, cost of goods is calculated pretty straightforwardly: it's only what you actually paid suppliers for the merchandise. Rent, salesperson wages, utilities, internet - all of that is operating expenses, they go in a separate category. A lot of beginners mix these up and end up with a wrong picture of their profit. Really, the cost of goods doesn't change depending on how many people work in your store or what your rent is. It's just the purchase cost.
Here's how to calculate it: put the total cost of all goods you bought during a period into a spreadsheet somewhere, divide it by the number of units sold - that's your average cost per item. Then as a separate line item, put all your operating expenses: salaries, rent, utilities, packaging, shipping. These expenses affect whether your store is actually profitable or not, but they don't go into the cost of a specific item.
To figure out if you're actually in the black, calculate it like this: sales revenue minus cost of goods sold minus all operating expenses. That's your actual profit or loss. If using this method you find out your store is in the red, then either your prices are too low, or you need to cut expenses, or your sales are weak. Each of these problems needs a different solution, but without proper calculations you're just flying blind.
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